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Superannuation
Super industry cautious on more reform

The financial services industry and business community in Australia has responded in a generally positive manner to the government's 2020-2021 budget, but the super sector is so far cautious in its response.

Australian Institute of Superannuation Trustees (AIST) chief executive Eva Scheerlinck was a little more cautious in her response to the budget, with more superannuation reform.

"We will need to see the stapling scheme in more detail, but we do have a number of concerns. There is the danger of people being mis-sold or stapled to an underperforming fund outside the default system. It is also a concern that there may be individuals who find themselves uninsurable because they are stapled to a fund whose insurance does not cover their occupation," Scheerlinck said.

"There is no place for underperformance in defaults but the government has failed to address the greatest area of consumer harm in super which is outside the default system."

However, she added: "Overall, the budget was a missed opportunity to improve retirement outcomes for low income earners and women."

The Association of Superannuation Funds of Australia (ASFA) said it supports measures to lift standards for MySuper products but changes need to be carefully considered.

"We don't suffer from a shortage of good funds and we need to ensure that these measures don't reduce competitive intensity or damage the nation building role of superannuation," said ASFA chief executive Martin Fahy.

"In the absence of the release of the Retirement Income Review and the lack of specificity in the Budget papers, it is unclear how the changes will work in practice or what the implications will be for competition, efficiency and incumbents in the sector."

Industry Super Australia (ISA) expressed concern the government's "stapling" initiative could see members tied to underperforming funds for life.

"Stapling the money to a member would remove multiple accounts quicker and more effectively weed out underperformers. Underperformance is the biggest cost drain on member savings and dud funds need to be removed no matter what type of fund they are," ISA chief executive Bernie Dean said.

"With the government's early release of super scheme sending millions of members accounts backwards every dollar in saved fees and improved returns is desperately needed and will ensure members get the maximum benefit of the legislated SG increase."

Super Consumers Australia was more positive about the reforms, with director Xavier O'Halloran saying the changes would likely leave people better off in retirement.

"Superannuation account stapling means no more duplicate fees and duplicate insurance, creating a huge saving for people over their lifetimes," O'Halloran said.

"The government has rightly recognised that for stapling to work the system needs to support people to find good performing funds for their retirement savings. We look forward to working with the government as it develops the proposed YourSuper comparison tool to inform consumer decision making."

He also welcomed annual performance tests as a means to weed out poor performers, but cautioned that work needs to be done to make sure existing members are not disadvantaged.

The Financial Services Council (FSC) offered a warm reception to Treasurer Josh Frydenberg's budget announcement.

FSC chief executive Sally Loane said: "The government has risen to the challenge created by the current economic downturn and has announced targeted stimulus that will help businesses recover and create jobs. Importantly, consumers will be protected by comprehensive reforms to the default superannuation system, which will eliminate the scourge of multiple accounts and fees."

Loane was also positive on the YourSuper package, which she said had the potential to address the issue of account duplication and fund underperformance.

"The FSC congratulates the Government for committing to the Royal Commission's 'default once' recommendation, which will prevent unnecessary account erosion from fees and the creation of new duplicate accounts," Loane said.

"The government's commitment to implement an ATO portal to help consumers select a high performing fund, and new APRA powers to weed out chronic underperformance, is a long-overdue reform that clearly puts the interests of consumers first."

Likewise, BetaShares chief economist David Bassanese agreed that the budget's initiatives seemed "well designed" in providing a boost to household and corporate spending.

"If a vaccine is also made widely available by early next year, the economy would be set up to truly boom in 2021 - raising the prospect of interest rates increases, rather than further cuts," Bassanese said.

"As it stands, the strong near-term fiscal stimulus provided in this week's budget appears to reduce the risk of the RBA cutting interest rates as early as next month. There is now a greater chance that the RBA leaves interest rates untouched for the foreseeable future - which ultimately should be welcomed to avoid the risk of housing and share market bubbles."

Business NSW said the budget was likely to be broadly supported by many in the business community.

"The focus on job creation and investment is the right one for these times and the government should be commended for listening to the legitimate concerns of the business community when preparing this financial blueprint," Business NSW chief executive Nola Watson said.

"The circumstances around this budget are unlike any other since the Second World War. It's also easy to forget the impact of drought and bushfires which had a jarring impact on the economy long before the pandemic took hold."

Meanwhile, the Australian Banking Association (ABA) said the budget is likely to cushion the economic blow of COVID-19.

"This budget is a key milestone as we shift from emergency to recovery, from triage to rehabilitation," ABA chief executive Anna Bligh said.

"This budget has the right focus on creating jobs and will help chart Australia's road to recovery."

Read more: UnderperformanceFSCISABusiness NSWYourSuperABAASFAAssociation of Superannuation Funds of AustraliaDavid BassaneseEva ScheerlinckSally LoaneXavier O'HalloranAnna BlighAPRAATOAustralian Banking AssociationAustralian Institute of Superannuation TrusteesBernie DeanBetaSharesFinancial Services CouncilIndustry Super AustraliaMartin FahyNola WatsonRetirement Income ReviewRoyal CommissionSuper Consumers AustraliaTreasurer Josh Frydenberg
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